CORPORATIOINS

a) Execute the certification & deliver to Dept. of State
b) Hold organizational meeting, where they:
• Adopt bylaws
• Elect initial directors (who take over management at that point from incorporators)

• The Dept. of State files the certificate

→ conclusive evidence of valid formation, i.e. we have a "de jure" corporation, aka legal corporation

a) Corp name
b) Address (i.e. county where office will be located, not where actually does business)
c) Service of process information
d) Name & address of each incorporator
e) Corporate purpose
f) Stock information

• Designation of NY Sec. of State as corporate agent for service of process
• Address where service of process will be forwarded
• Optional: designation of another agent

May be broad, e.g. "to engage in all lawful activity, after first obtaining necessary state agency approval", or
• Narrow.

• Authorized stock
• # Shares per class
• Par value, rights, preferences & limitations of each class
• Information on any series, i.e. subclass, of preferred shares

→ ultra vires acts
▫ Ultra vires k are valid, but
▫ SH can seek injunction, and
▫ Responsible managers are libale to corp. for any consequent losses

i) There is a relevant corporation statute (BCL)
ii) The parties made a good faith, colorable attempt to comply with it
a) unlikely to apply unless incorporators did everything properly BUT the Dept failed to file the certificate (without rejecting it)
iii) The business is being run as a corporation

Entitled to due process & equal protection,
BUT NOT Privileges & Immunities Clause protection

only allowed if the Certificate or a SH Bylaw allows

FIduciary duties o each other & corp, incl. prohibition on secret profit.

i) Promoter is liable for pre-incorporation k unless
a) contract clearly indicates otherwise
b) there is a novation that the Corp will replace the promoter

liable only if there is a novation OR it adopts the k by
a) Express board action
b) Knowing acceptance of the benefit of the k (implied acceptance)

(i) Whether it was secret
(ii) Whether there was a profit:
NEW PROP: Price paid by Corp - Price paid by Promoter
PRIOR OWNED PROP: Profit = Price paid by Corp - FMV

i) Apply to NY Dept. of State, providing information from its certificate & proof of good standing in its home state
ii) Designate the Secretary of State as agent for service of process
iii) Pay fees & taxes

i) Pre-incorporation subscriptions are irrevocable for 3 mo unless the subscription provides otherwise or all subscribers agree to let you revoke
ii) Post-incorporation subscriptions are revocable until accepted by the corp (i.e. Bd)

Shares may be cancelled
*But if the buyer paid at least 50%, must firs tattempt to sell & remit any profit to Buyer

restored to the status of authorized, not issued, shares (forfeited payments = capital surplus)

A written, signed offer to buy stock from the corporation

If stock issued below par → "watered stock,"
• Directors who knowingly authorized issuance & buyer are liable to the corporation or to creditors if the co is insolvent
• 3rd party purchases is not liable if she acted in good faith

The right of an existing SH to maintain her % ownership by buying stock where there is a new issuance of common stock for money

iii) No preemptive rights unless certificate says so
(opposite rule if corp formed before 1998 & stock has unlimited dividend or voting rights)

if SH unable to elect directors for 2 annual mtgs

management's illegal, oppressive, or fraudulent acts to SH
OR management waste, conversion, or dilution of assets

if directors too divided to manage or SH too divided to elect directors or a magnitude of internal dissention makes dissolution beneficial to SH

corp has insufficient assets to discharge liabilities or dissolution would benefit SH
*Bd pas also pass such a resolution

→ enter "wind-up"
(1) gather assets
(2) convert to cash
(3) pay creditors
(4) distribute remainder to SH (any distribution preferences must be in the certificate)

If corp disappears in merger, or sells subst. all stock/assets

Corp amendment that affects preferences,
preemptive rights,
redemption rights,
voting rights

the right to force the corporation to buy your stock at FMV
i) Only applies if corp is not publicly traded
ii) FMV determined by agreement between parties or suit brought by Corp to determine value

i) File a written objections & intent to demand payment before the SH vote
ii) Abstain from vote or vote against the change
iii) After vote, make another written demand to be bought out

Sale of assets

"short form merger" (P Co owns 90%+ of each class of Sub merged into P)

no liability on seller for torts of buyer unless (1) deal provides otherwise, (2) buyer is a mere continuation of the seller, (3) deal entered fraudulently to escape obligations

W/in 90 days of petition, corp or other SH may buy petitioner's stock at FMV determined by ct.

Par value of issued stock
a) any premium paid on the stock is surplus
b) if no par, Bd can allocate any part (but not all) of the price received to surplus

Assets - Liabilities - Stated Capital

Not unless the board has, in its discretion, already announced the dividend.

must produce w/in 5 days of written SH demand
BUT CORP MAY REQUIRE AFFIDAVIT (SH purpose is in the interest of the corporation and he has not tried to sell any list of SH w/in 5 years)

must produce w/in 5 days of written SH demand

Can produce by mail

CL right may be braoder than BCL

the certificate, by laws, or agreement between the SH & the corporation.

reasonable, i.e. not an undue restraint on alienation

a) Right of first refusal is reasonable if the price offered is reasonable

b) Requirement that corp approve all stock sales is not reasonable

c) Requirement that you only sell to other SH or the corp might be reasonable

iii) Cannot be invoked against transferee unless it is conspicuously noted on the certificate OR transferee had actual notice of the restriction

Plurality
Cummulative Voting Allowed
May classify board

i) All SH, Officers & Directors must be licensed professionals
ii) Certificate requirements are the same except must use "PC," indicate the profession to be practices, and include the names & addresses of all original SH, Officers & Directors, certifying that they are licensed to practice the profession

PC must buy back shares

- There is a de jure corp
- UNLESS: Court pierces corporate veil
- 10 LRGST SH have liability for wages

1) CLOSELY HELD CORP
2) SH ABUSES PRIVILEGE OF INCORPORATING (undercapitalization probably not enough)

1) SH is also a manager in a closely held corp
2) MAJ SH has fiduciary duty not to oppress (e.g. no usurping corp oppty)

SH's reasonable expectation for buying stock are defeated

No looting or other bad faith

good faith & with that degree of care & skill an ordinarily prudent person would exercise in similar circumstances

Improper distributions/dividends, waste of corporate assets, illegal transfers (e.g. improper loans to directors)

1) Breach of duty
2) Biz Judgment rule doesn't apply
3) Loss is proxiamately caused by mis/nonfeasance

DISSENTS
1) in minutes, writing to Sec at the mtg, or in a registered ltr promptly after OR
2) if D was absent, in a writing w/in reas time
*Not possible if D voted for action

A director must act in good faith & with the fairness & honesty that the law requires of a fiduciary

A corp can disclaim a contract if D failed to disclose
UNLESS D can prove that the deal was fair & reasonable

Cannot trade on inside info or fail to disclose special facts that a reasonable investor would consider important

Removed for cause, by SH OR
(if cert/bylaws allow) by D.

Remove for any reason by SH (if cert/bylaws allow)

If D loses to corp -> Not OK unless Ct says so
If D wins -> Mandatory
If D settles, loses to 3rd party, etc. -> Permissive UNLESS D acted in bad faith

*Insurance always allowed

1. Stock ownership (harm & thru suit)
2. Adeq rep
3. SH makes a demand on corp to sue (with some exceptions)
4. Corp joined as D
5. SH posts bond (unless owns 5%+)
6. ANy settlement approved by court

It would be futile i.e. Bd is interested, failed to reasonably inform itself og hte transaction, or the breach is so egregious it could not be the result of sound business judgment.
*Must be pled with particularity

*If refused, can only sue if Bd interested or its procedure was innaccurrate

The bd, unless cert allows SH to do so.

1) Unanimous written consent
2) Majority vote at a proper meeting, unless requirement changed

1) Qurom
2) Notice
3) Vote

MAJ OF
Board positions
Shares (not SH) entitled to vote

*May be INCREASED in cert or DECREASED in cert or bylaws

INCREASE in certificate

SH ONLY

TRUSTS: Require formalities, expire in 10 yrs, but specifically enforceable

11 months, unless otherwise noted.

At any time, unless coupled with an interest or given subject to a voting agreement